The GIB Blog

Achieve Inventory Optimization inside SAP

By: Eric Jones 

      eric.jones@gib.world

We are often asked how to perform discrete optimization with SAP ERP. For those of you who are unfamiliar with the term, discrete optimization is about deriving the mathematically optimal solution to minimize cost and maximize service at the lowest level of the supply chain. Each material/plant combination has its own demand and supply history, biases, and performance. Discrete optimization moves beyond general rules of thumb like, "all materials should have a 95 percent service level or a two week safety stock," and finds the unique and best inventory strategy at the atomic level that will ultimately lead to an optimized inventory system. Discrete optimization is critical in wringing out the last drop of excessive, unproductive inventory in your supply chain.

Until recently, there have been roadblocks to discrete optimization due to the amount of computing power required as well as the cost of discrete optimization engines that usually reside outside of core ERP. Fortunately for SAP customers, there is an affordable, easy-to-implement answer; GIB.  The GIB Supply Chain Suite delivers discrete optimization functionality within core SAP ERP.  Companies running GIB inside their SAP instance are able to drive millions of dollars out of their supply chain, while improving product availability. This has been proven by long-term customers of GIB. Gunnar Clavey, Head of Tactical & Commercial Planning, SATAIR Group, Airbus, reported that "stock value fell from 62M Euros to 54M Euros over an 18 month period...the main contributor to the stock reduction was the GIB."

Inventory is the proxy for information. The less information you have about demand and supply, the more inventory you need to buffer against the uncertainty. If you are running SAP ERP today, then you have the full transactional history of your material movements. If this information resides in ERP, then the optimization process should happen in ERP as well. There is no value of extracting data out of ERP to do mission-critical computations. With GIB, real-time optimization, simulation, and performance reporting are available inside of SAP ERP today.

For more information on the GIB suite of SAP centric solutions, visit us at www.gib.world/us

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